ESTONIA

AT A GLANCE

Estonian Investment Agency » investinestonia.com Heart of the Baltic Sea Strategic location – global vision

Area 45,227 km2 (similar to Denmark or Netherlands), about 50% covered by forest

Currency Euro

Population 1.3 million (68% Estonians, 25% Russians) Capital (403,000)

Member of EU and NATO since 2004 Credit ratings Fitch A+ Member of Schengen zone S&P AA since 2007 Moody’s A1 GDP growth 2002-2012

15 15

10,2 10 9,2 10 7,8 7,5 7,1 7,1 7,6

5 5 3,1 3,2

0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

-5 -3,6 -5

-10 -10

Source: Statistics -15 -14,1 -15

Exports represent about 78% of Estonia’s GDP Foundations of economic growth - important factors for foreign investors

According to OECD Economic Survey, our strong recovery from the economic crisis has benefited from structural strengths of the Estonian economy: . flexible labor force, 0% corporate income tax on reinvested profits – favourable . business friendly regulation, for growing companies . well capitalized financial institutions, IV quarter of 2012 . successful transition to euro, Unemployment 9.2% Average salary 916 EUR . and sustained credibility of fiscal policy Minimum salary 290 EUR

Estonia is one of the most successful countries in the world in attracting FDI Business in Estonia

Estonians are front-runners in new technology … . … our e-services, . … telecom and . … internet communications are among the best in the world

… and sustainable development . … sustainable economic environment and fiscal policy . … sustainable natural resources and energy policy

Culture as an added value … . … perseverance and culture – good basis for long-term plans in any area of business . … rootedness – guarantee that Estonians do not break promises or give up . … rational and honest partner with a functional approach What does Estonia have to offer?

. … unique location at the heart of the Baltic Sea, on the border of East and West

. ... healthy economy, economic and political stability

. … progressive environment, efficient way of doing business

. … highly developed, efficient and compatible infrastructure that supports business development

. … culture combining Nordic roots and Eastern influences

Estonia as a distribution hub • Estonia has been a global trading post for 760 years • Key gateway between the East and West • Impressive infrastructure • Ease of trading across borders Strategic Location – 240 million market Strategic Location - Accessibility

. Toll free roads, excellent capacity, 10 border inspection posts from Estonia to Land Russia . Electronic pre-arrival customs processing for the European Union and Russia border checkpoints . Excellent national and international rail network with particularly strong links to Russia including ppartnership with Russia’s major wagon owners. Containers to Central Asia: regular train “Baltic Transit” operated since 2003

. Port of Tallinn - largest and deepest (18 m deep) port of the Baltic Sea . Port of Sillamäe - easternmost port of the European Union Sea . EU tax exemption in the customs-free zones of the ports . All-year navigation without assistance of ice breakers . An ideal location for cargo shipment to neighbouring markets

. 2 main international airports: Tallinn; Tartu Air . Most European capitals served directly within 3 hours . Global connections via , , Frankfurt, Munich, , . Helsinki connection provides frequent services to Far Eastern cities in China, Japan and South Korea Business environment

Estonia is the heart of the Baltic Sea Region – Europe’s fastest growing market High position in business environment rankings

The World Bank “Doing Business in 2013” report places Estonia on an overall 21st rank among 183 countries, because:

• starting a business is easy • taxation is simple and transparent • investors feel secure • trading across borders is active • communication is easy • flexible job regulation • low corruption

Easy to do business – World class trading location

. Estonia is consistently ranked by Trading Across Borders ranking, 2013 IMD, World Bank and the World 80 Economic Forum as one of the 73 70 68 easiest and most efficient places to do business in the world 60 50 . Estonia is Ranked 7th out of 185 50

economies for the ease of Trading 40 Across Borders. 30 24 . Factors benchmarked: 20 14 16 . number of all documents required 13 6 7 8 to export/import goods, 10 . time necessary to comply with all 0 procedures required to export/import goods, and . cost associated with all the procedures required to Source: World Bank – Doing Business 2013 export/import goods http://www.doingbusiness.org/economyrankings/?direction=Asc&sort=9

Healthy economy: Lowest government debt in Europe

…6.1% of GDP in 2012

Eurostat: General Government Gross Debt % of GDP Simple and favourable tax system

Tax rate on corporate income, 2011 . * 0% corporate income tax on reinvested profits . innovative approach Germany 30.2% . Distributions are subject to income tax of 21% Sweden 26.3% . Personal income tax: flat rate 21%. Same rate for expats

UK 26.0% . VAT: 20%

Finland 26.0% . Social tax: 33% (20% social security and 13% health insurance)

Hungary 19.0% . Unemployment insurance: 3% of the gross salary. (Employer pays 1% of the salary and deduction from employees salary is 2%.) Czech Rep 19.0% . No property tax Poland 19.0% . The land tax is from 0,1% to 2,5% on the assessed value of the land, Lithuania 15.0% rate established by local government (i.e in Tallinn 2,5%). Latvia 15.0% . All the taxes can be declared via E-tax/e-customs (electronic service ESTONIA 0% * desk of the Estonian Tax and Customs Board)

0.0% 10.0% 20.0% 30.0% 40.0% 0% corporate income tax on Source: European Commission reinvested profits – favourable for growing companies Estonian GDP by economic activity, 2011 Professional and scientific activities Information and 4,7% communication 4,7% Other Education 24,3% 4,7%

Construction 6,3% Manufacturing 17,8% Public administration 6,9%

Transport and storage Real estate Wholesale and 9,1% 10,0% retail trade 11,5%

Source: Statistics Estonia FDI inflow into Estonia by countries and activity

Sweden 27,3% Financial and insurance activities 25% Finland 23,0% Manufacturing 16,8% Netherlands 10,3% Norway 5,0% Real estate activities 14,6% Russia 4,3% Wholesale and retail trade 13,2% Lithuania 3,1% Professional, scientific, technical activities 9% Cypros 2,9%

Germany 2,4% Transportation and storage 5,6% Denmark 2,4% Information and communication 3,2% USA 2,3% Other 17% Other 12,6%

Source: Bank of Estonia Key sectors

Estonia focuses on the following key sectors:

. ICT . Industrial machinery and metalworking . Transport and logistics services . Business and financial services . Electronics . Cleantech e-Estonia

• Estonia – country of startups and home of

• Internet banking – in 1995 out of 5 internet banks in the world, 3 were in Estonia

• ID-card, electronic passports

• mobile-ID Starting a business

Two main types of company – private limited company (OÜ) and public limited company (AS) • Most popular type - OÜ Minimum share capital of OÜ – 2,500 EUR • When establishing a company, share capital can be paid by monetary contributions, non-monetary contributions or with no contributions at all – Private persons can establish an OÜ without payments into share capital, postponing them until such necessity actually arises • Owners and board members may be foreigners Company establishment is fast and simple

Foreign investors

• Can own company 100%

• Can own land and real estate

• Residence permit for the director

• Have same rights as local investors Quality Talent Pool - Pipeline of Students and Graduates Universities & vocational colleges: student base = 97 000

Number of students (higher education institutions) Number of graduates (higher education institutions)

Name of the Name of the Name of Name of study 2009/2010 2010/2011 study 2008/2009 2009/2010 faculty faculty programme programme Social and Social and behavioural 3 833 3 799 behavioural 764 637 sciences sciences Social Social sciences, Journalism 1 185 1 227 sciences, Journalism 207 222 business & business & Business Business law 19 227 17 622 law 3 717 3 816 Administration Administration

Law 4 155 3 665 Law 745 783

Total 16 206 16 035 Total 4 025 3 554

Technical Electronics and Technical Electronics and 2 445 2 147 606 555 fields automation fields automation Mechanics and Mechanics and 2 070 2 053 538 473 metalwork metalwork

Source: Ministry of Education and Research Quality Talent Pool – Engineers: Qualified & Experienced

Rank Education Levels Workforce

Specialised 1 45,700 Secondary

2 Master’s Degree 19,100

3 Bachelor’s Degree 8,700

4 Doctorate / PhD 900

Almost half of engineering workforce has studied either a specialised or vocational engineering course, highlighting strong government support for the sector.

Estonia ensures that its talent pool is being refreshed, to guarantee a stabile Source: Oxford Intelligence Location Skills Audit© 2010 supply of employees for the future. This is continually balanced with experience to service corporate needs for more senior ranking positions. Quality Talent Pool – Key Specialist Engineering Skills

Rank Engineering Skill Workforce

Electrical and 1 26,700 Electronics

2 Mechanical 22,200

Industrial and 3 22,000 Manufacturing

4 Automotive 14,300

Companies recruiting in Estonia can readily access a diverse range of engineering skills and experience.

Source: Oxford Intelligence Location Skills Audit© 2010

R&D Knowhow - Competence Centres

Competence Centre Competence / Activity Website

Competence Centre in To improve competitiveness of Estonian and www.eliko.ee Electronics-, Info- and European ICT industry through the deep Communication integration of research and production Technologies - ELIKO institutions

Innovative Manufacturing To improve the competitiveness of Estonian www.imecc.ee Engineering Systems engineering industry and to develop cultural, Competence Centre - ethical, and social values based on increasing IMECC integrated industrial use of new technologies

Software Technology and To conduct industry-focused research with the www.stacc.ee Applications Competence aim to develop leading-edge solutions in the Centre - STACC fields of data mining and software technology Testimonials

“We work with Tallinn Technical University to direct the courses they offer toward our specific needs and we handpick our engineers through this cooperation. It takes only simple maths to conclude this is a great place to do business. In Sweden, one employee has roughly 1,400 workable hours. In Estonia, the same employee has 1,750 hours.”

“Even when the labour market has been at its tightest, ABB has been able to recruit and train the specialists it needs. When ABB could not find the specialists it needed to produce turbines for wind generators, it created programs and trained them itself.”

“For one-and-a-half years now we’ve added value with design and development. We have always managed well getting the engineers we need. From the point of having an ambitious vision, we have quite quickly come to having a fully functional team of bright young engineers integrated with the overall R&D team at Stoneridge Electronics”. Enterprise Estonia (EAS)

Estonian Investment Agency (EIA)

Enterprise Estonia

• 270 employees Enterprise Estonia promotes business and regional policy • 2013 budget €111 million in Estonia

Development of • new enterprises • tourism • regions and society • production and export

Estonian Investment Agency • Foreign direct investments Incentive programmes

Enterprise Estonia offers enterpreneurs monetary subsidies, consultations, cooperation and training programmes

Incentive schemes for entrepreneurs include: . Incentives for start-up enterprises . Incentives for development of enterprises . Support for export marketing . Innovation and product development grants . Technology investment grant for high-impact industrial investors and subcontractors (starting from investment of €10 million) Estonian Investment Agency

EIA is a division within Our mission Enterprise Estonia • to ensure a competitive business environment for foreign investments in Estonia • to establish and develop business relationships with international companies We participate in economic We provide policy development • Information services and investment preparation • Investment proposals and tours Our responsibilities include • Consulting and project management - image building, - investment promotion, • Facilitating contacts, negotiation with authorities - trade development, • Organizing recruitment and identifying suitable - global network properties management • Post-investment / aftercare services Representations of Estonian Investment Agency

• Tallinn, Estonia • Moscow, Russia • Helsinki, Finland • Saint-Petersburg, Russia • , Sweden • Silicon Valley, USA • London, UK - 11 offices, 10 countries • , Germany - A global network of partners • , Japan and service providers • Shanghai, China - In China since 2007

For additional information please contact:

Jaan Heinsoo

FDI Manager Phone: +372 6279 520 Mobile: +372 50 12424 email: [email protected]

Estonian Investment Agency Enterprise Estonia www.investinestonia.com www.tradewithestonia.com www.eas.ee